Minister Pradhan: India revises Gorgon LNG deal with ExxonMobil

First shipment of LNG from the Gorgon project on Barrow Island – March 2016 (Image: Chevron Australia)

India has secured a price reduction on an Australian 20-year liquefied natural gas (LNG) deal the country has with ExxonMobil, according to the country’s oil minister, Dharmendra Pradhan.

Petronet LNG, India’s largest importer of the chilled fuel, signed the deal back in 2009 under which it agreed to buy around 1.5 million tonnes a year of LNG from ExxonMobil’s share of the giant Gorgon LNG project Barrow Island in Western Australia.

The $54 billion LNG project, that shipped its first cargo in March last year, is operated by Chevron that owns a 47.3 percent stake, while ExxonMobil has a 25 percent share.

Supplies under the original Gorgon deal to Petronet began from January this year, with the landed price of LNG costing about $11-$13 per million British thermal units (mmBtu).

Pradhan said on Saturday the India had been able to renegotiate the contract securing better prices for price-sensitive Indian customers.

“Happy to share good news that India has, yet again, been able to address the long term price issue of LNG from Gorgon to suit Indian market,” the Minister said in a brief statement through its social media channels.

“Indian consumers will receive LNG volumes at amicable price soon; this is done in a similar way to what we had done with LNG from Qatar,” he said without providing any additional information on the new pricing terms.

India has been pushing real hard in seeking cheaper deals, also renegotiating a contract with Qatar in 2015. State-run gas company GAIL (India) Ltd has also signed three time-swap deals with international players to sell some of its previously contracted U.S. LNG supplies as it is trying to reduce costs.

India could save more than Rs 10,000 crore ($1.56 billion) over the life of the revised contract signed with ExxonMobil, the Press Trust of India reported.

The Gorgon LNG prices are now linked to about 13.9 percent of the global oil price on a delivered basis, according to the report.

In a related development, India’s Petronet LNG has also agreed to buy an additional one million tonnes of LNG from ExxonMobil’s share of the Gorgon project, Reuters reported on Monday citing unnamed sources.

The deal for additional volumes is yet to be signed.

Petronet will buy the LNG on delivered basis with a price equivalent to about 12.5 percent of Brent oil prices, the news agency said.